Study For The Effect Of Intra-product Trade On China’s Urban-rural Income Distribution

The environment of international trade becomes more and more complex within theglobal production network, coupled with the technological advances in transportation andcommunication which reduced the transaction costs, intra-product trade has gradually becomeone of the mainstream forms of international trade. China participates in global productionnetwork by processing trade. After more than30years’ development, intra-product tradegradually become an important part of China’s foreign trade, and has made great contributionto China’s economic development. However, China’s income gap between urban and ruralresidents has a trend of expansion. As a kind of market economy behavior, intra-productiontrade must have asymmetric impact on urban and rural laborers’ income by competitionmechanism. What’s relationship between intra-product trade and income distribution, andhow can intra-product trade affect the income of urban and rural residents? Research on thisproblem has important practical significance, which can use intra-product trade alleviate theurban-rural income gap, and then promote the development of economy.Under the guidance of factor endowments theory and Feenstra model, this article studiedthe relationship between intra-product trade and income distribution. Firstly, this paperdiscussed the mechanism of impact of intra-product trade on urban and rural incomedistribution from the angle of theory. Secondly, basis on the theoretical analysis, this paperestablish static panel model to test the impact of intra-product trade on the urban and ruralresidents’ wage income and dynamic panel model to test the impact of intra-product trade onurban-rural income gap. The results show that:1) Intra-product trade can raise the urban andrural residents’ wage income, but the effect of its import and export are different. The exportof intra-product trade will increase rural residents’ wage within1%of the significance level,while import can significantly improve the wage of urban residents, but for urban residents inwage income is little impact; its imports could significantly improve the urban residents’ wageincome and little effects on the rural residents’ income.2) Under the constraints of factorendowment structure, the export and import of intra-product trade has different impact on theurban-rural income gap by the mechanism of employment and technology spillovers. Export of intra-product trade can significantly reduce China’s income gap, but the import has theopposite and weak effect on it. Research also found that the level of human capital can narrowthe urban-rural income gap which is more obvious than the export of intra-product trade does.